Sorted by Commenter - Ethics - State of California
Sorted by Commenter - Ethics - State of California
Sorted by Commenter - Ethics - State of California
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RRC – Rule 1.5 [4-200]<br />
E-mails, etc. – Revised (6/1/2010)<br />
nonrefundable in the parties' agreement. In other words, the actual treatment <strong>of</strong> the funds<br />
trumps the language <strong>of</strong> the retainer agreement.<br />
In an earlier case (Matthew v. <strong>State</strong> Bar, 49 Cal. 3d 784 (1989)), an attorney was retained<br />
to handle a real estate fraud matter. The attorney required his client to provide a<br />
nonrefundable retainer "to ensure that his client would 'work with him on the case.' " The<br />
fee agreement required $5,000 up front, with a $10,000 ceiling on fees, and stated that the<br />
attorney would "bill for his time at the rate <strong>of</strong> $70 per hour until the bill reached $5,000." (49<br />
Cal. 3d at 787.) The attorney represented the client for seven months, and the client paid<br />
more than $6,000 in attorneys fees during that time. The attorney kept no time records and<br />
provided no billing statements, but he estimated he spent 32 to 40 hours on the case. After<br />
unsuccessfully seeking a refund, the client took the attorney to arbitration to recover<br />
unearned fees. The arbitration panel found in the client's favor, but the attorney still did not<br />
refund the money.<br />
In another fee agreement, the same attorney provided for a $1,000 nonrefundable retainer.<br />
After the client terminated that representation, a dispute arose as to unearned fees. The<br />
attorney failed to perform needed work, provided no billing statements, was unavailable,<br />
and "admitted that he was not diligent in this matter and that he was unable to work on the<br />
matter in a timely fashion due to his caseload." (49 Cal. 3d at 789.)<br />
The <strong>California</strong> Supreme Court emphasized the seriousness <strong>of</strong> the attorney's misconduct,<br />
identifying failure to refund "unearned fees as serious misconduct warranting periods <strong>of</strong><br />
actual suspension, and in cases <strong>of</strong> habitual misconduct, disbarment." (49 Cal. 3d at 791.) In<br />
addition to being disciplined, the attorney was required to return all unearned fees,<br />
notwithstanding the nonrefundable language in the retainer agreements (49 Cal. 3d at 792).<br />
Proper Language<br />
To be valid, an agreement calling for a true retainer should show that the client is<br />
purchasing something valuable. For example, the agreement may refer to specific blocks <strong>of</strong><br />
time when a specific attorney will be available, or state that the payment guarantees the<br />
attorney will refrain from taking adverse clients. The agreement might also state that the<br />
payment secures the attorney's availability for a future engagement.<br />
In addition to having a proper written agreement, the attorney also should be prepared to<br />
demonstrate that he or she has provided real value. For the average attorney, a true<br />
retainer is unlikely to be appropriate unless the lawyer is setting aside specific blocks <strong>of</strong><br />
time for the client. A highly experienced or specialized attorney may justify a true retainer<br />
more easily, as long as the attorney arranges to be available and the retainer agreement<br />
reflects that. It may be appropriate to outline the attorney's specialized reputation or<br />
experience in the agreement to demonstrate the value purchased <strong>by</strong> the client.<br />
In drafting an effective true retainer, attorneys should state as specifically as possible the<br />
time that the client is buying and what the attorney will do with that time. The attorney may<br />
agree to sit in the <strong>of</strong>fice and wait for the client's weekly phone calls between 10 a.m. and<br />
noon on Tuesdays. In this situation, <strong>of</strong>fice records should demonstrate that the attorney<br />
was available (perhaps <strong>by</strong> entering data in a time log).<br />
True retainer funds should be placed in an attorney's general account and not in a trust<br />
account. If the attorney places funds in a trust account and bills against them, the<br />
RRC - 4-200 [1-5] - E-mails, etc. - REV (06-01-10).doc -128-<br />
Printed: May 26, 2010<br />
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